betsy c. manifold (182450) rachele r. rickert (190634) brittany...

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BETSY C. MANIFOLD (182450) [email protected] RACHELE R. RICKERT (190634) [email protected] BRITTANY N. DEJONG (258766) [email protected] WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP 750 B Street, Suite 2770 San Diego, CA 92101 Telephone: 619/239-4599 Facsimile: 619/234-4599 JANINE L. POLLACK [email protected] MICHAEL JAFFE [email protected] GLORIA KUI MELWANI [email protected] WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP 270 Madison Avenue New York, New York 10016 Telephone: 212/545-4600 Facsimile: 212/545-4653 [additional counsel on signature page]

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - SOUTHERN DIVISION

DUANE ROBERT GREENE, SHAWN RANDALL THOMAS and JAMES HIRTZEL, on behalf of themselves and all others similarly situated, Plaintiffs, v. FIVE PAWNS, INC., Defendant.

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Case No. COMPLAINT FOR VIOLATIONS OF: (1) CAL. CONSUMERS LEGAL REMEDIES ACT; (2) CAL. UNFAIR COMPETITION LAW; (3) CALIFORNIA FALSE ADVERTISING LAW; (4) INDIANA DECEPTIVE CONSUMER SALES ACT; (5) N.Y. GEN. BUS. LAW; (6) BREACH OF EXPRESS WARRANTY CLASS ACTION DEMAND FOR JURY TRIAL

Case 8:15-cv-01859 Document 1 Filed 11/11/15 of 46 Page ID #:1

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Plaintiffs Duane Robert Greene (“Plaintiff Greene”), Shawn Randall

Thomas (“Plaintiff Thomas”) and James Hirtzel (“Plaintiff Hirtzel”) (collectively,

“Plaintiffs”), by and through their undersigned attorneys, bring this action on

behalf of themselves and all others similarly situated, and the general public, based

upon personal knowledge as to themselves and their activities, and on information

and belief as to all other matters, against defendant, Five Pawns, Inc. (“Five

Pawns” or “Defendant”), and allege as follows:

JURISDICTION AND VENUE

1. Diversity subject matter jurisdiction exists over this class action

pursuant to the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4

(2005), amending 28 U.S.C. § 1332, at new subsection (d), conferring federal

jurisdiction over class actions involving: (a) 100 or more members in the proposed

class; (b) where at least some members of the proposed class have different

citizenship from some defendants; and (c) where the claims of the proposed class

members exceed the sum or value of five million dollars ($5,000,000) in the

aggregate. 28 U.S.C. §§ 1332(d)(2) and (6).

2. While the exact number of members in each of the proposed classes is

unknown at this time, Plaintiffs have reason to believe that thousands of consumers

purchased Defendant’s vapor liquids (“e-liquids”) for electronic cigarettes (or “e-

cigarettes”)1 throughout California, Indiana, and New York during the relevant

period. The number of class members could be discerned from the records

maintained by Defendant.

3. While the exact damages to Plaintiffs and the members of the classes

are unknown at this time, Plaintiffs reasonably believe that their claims exceed five

million dollars ($5,000,000) in the aggregate.

1 E-liquids are sometimes used in devices called personal vaporizers, which are products that include, but are not synonymous to, electronic cigarettes.


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4. Jurisdiction over the New York and Indiana Plaintiffs is proper

pursuant to 28 U.S.C. § 1367, which provides, in relevant part, that: (a) “in any

action of which the district courts have original jurisdiction, the district courts shall

have supplemental jurisdiction over all other claims that are so related to claims in

the action within such original jurisdiction that they form part of the same case or

controversy under Article III of the United States Constitution . . . includ[ing]

claims that involve the joinder . . . of additional parties.”

5. This Court has personal jurisdiction over Defendant because

Defendant is a resident of the State of California and has purposefully availed itself

of the privilege of conducting business in the State of California.

6. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 because

many of the acts and transactions giving rise to this action occurred in this District

and because Defendant:

a. has intentionally availed itself of the laws and markets within

this District through the promotion, marketing, distribution and

sale of its products in this District;

b. does substantial business in this District, including maintaining

its principal place of business in this district; and

c. is subject to personal jurisdiction in this District.

7. Venue is proper in this Court as to the New York and Indiana

Plaintiffs and Claims under the doctrine of pendant venue.

NATURE OF THE ACTION

8. Defendant is a manufacturer of e-liquids, which are used in electronic

cigarettes. Defendant’s e-liquids contain hazardous substances known as diacetyl

(“DA”) and acetyl propionyl (“AP”) (also known as 2,3-pentanedione), in addition

to propylene glycol, glycerin, nicotine, and flavorings. As detailed herein, the DA

and AP levels detected for certain particular flavors of Defendant’s e-liquids


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represent the highest concentration that has ever been seen in any e-liquid. Some e-

liquids manufactured by other companies are sold without DA and AP, propylene

glycol, nicotine, or flavors, as it is possible to source ingredients that do not

contain these toxic ingredients.2

9. DA and AP are compounds of diketone and are responsible for the

buttery and creamy taste of many foods and beverages, most famously, popcorn.

While DA and AP are safe to eat or drink, inhalation is known to cause certain

lung conditions, including Bronchiolitis Obliterans, a condition in which

irreversible scarring to the lungs is produced, in serious cases requiring lung-

transplants. A number of cases of Bronchiolitis Obliterans in popcorn factory

workers exposed to DA and/or AP led authorities to create very strict limits on the

amount of these chemicals that workers may be exposed to. Similar cases of

Bronchiolitis Obliterans have since been discovered in workers in other types of

manufacturing plants.

10. It is also known that DA and/or AP are contributing factors to both

chronic obstructive pulmonary disease (“COPD”) and emphysema.3

11. Defendant does not warn its customers about the dangers of inhaling

DA and AP, neither on its product packaging nor on its website. Instead,

Defendant’s marketing campaign describes its e-liquids as if it were selling wine.

For example, the Company describes its “Bowden’s Mate” e-liquid as “crisp mint

with subtle chocolate undertones and a French vanilla finish,” while its “Absolute

2 For example, Virgin Vapor, Halo Cigs, Fireband, and Mt. Baker Vapor all produce e-liquids that are DA and AP free. Five Pawns also recently began selling a DA and AP free flavor of e-liquid called Symmetry Six. 3 S. Costigan, C. Meredith, An Approach To Ingredient Screening And Toxicological Risk Assessment of Flavours in E-Liquids, 72 REG. TOX. AND

PHARM. 361 (July 2015).


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Pin” e-liquid has an “intense complexity of Irish cream, cinnamon spice, and

caramel with subtle absinthe undertones.” Some special edition flavors in its line of

products are described as having been aged in oak barrels.

12. Despite Defendant’s marketing campaign that boasts its “top-notch”

ingredients” that makes for a “high-end experience,” Defendant’s products are

actually laden with harmful chemicals.

13. Sometime in 2009, users of electronic cigarettes began to become aware

of the presence of DA and AP in e-liquids and that those substances pose serious

health hazards, particularly health hazards associated with respiratory diseases.

Some e-liquid manufacturers took the issue seriously enough to make efforts to

halt usage of flavorings that contain DA and/or AP in their e-liquids. See ¶ 8 n.2,

supra.

14. From the Company’s inception in November 2012, it has manufactured

and sold high-end e-liquids in a variety of flavors, all containing various amounts

of DA and AP, depending on the flavor. While Defendant claimed on its website

that it “moved to source solely diacetyl-free ingredients,” it subsequently

discovered that “trace amounts of diacetyl” were found in its products. A number

of tests done on Defendant’s e-liquids, including one performed by a laboratory

retained by Defendant in September 2014, show that Defendant’s e-liquids contain

DA and AP, some at substantially more than trace amounts,4 thus directly

contradicting its claim that its e-liquids contain diacetyl-free flavorings.

15. Defendant did not disclose these results until June 2015, and it did so at

that time only in an attempt to rebut the testing that had been conducted by an e-

cigarette store in England called Cloud 9 Vaping (“Cloud9”). The Cloud9 test

results showed that some of Defendant’s line of products contain the highest levels

4 Trace amounts of DA and/or AP are amounts lower than 5 μg/ml.


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of AP that have ever been shown in a laboratory test of e-liquids. In light of these

test results, Cloud9 proceeded to withdraw the entire line of Five Pawns products

from its inventory. Shortly thereafter, the Electronic Cigarette Trade Association of

Canada (“ECTA”) notified Canadian vendors of e-liquids to withdraw and cease

sales of Defendant’s e-liquids.

16. Defendant’s e-liquids also contain varying levels of nicotine (in 0mg,

3mg, 6mg, 12mg, and 18 mg levels). The Cloud9 laboratory testing has also

shown that Defendant disclosed inaccurate nicotine levels on its packaging.

17. Defendant has employed numerous methods to convey to consumers

throughout the United States its deceptive, false and misleading message about its

e-liquids, including its packaging, product inserts, communications with its

customers via e-mail or internet forums, and its website through which it sells its

products directly to the public, https://fivepawns.com/blog/html (last visited

August 17, 2015).

18. As a result of Defendant’s deceptive, false and misleading claims in its

advertising, consumers – including Plaintiffs and the other members of the

proposed classes – have purchased Defendant’s e-liquids without being advised

that they contain a variety of toxins, impurities, and related potential health hazards

as found by various studies discussed in more detail below. Had Defendant

disclosed these material facts, Plaintiffs would not have purchased Defendant’s e-

liquids. Defendant was able to charge more than what its e-liquids would have

been worth had it disclosed the truth about them. In fact, Defendant charges one of

the highest prices for e-liquids in the e-liquid industry, at $27.50 for each 30ml

bottle of juice and $37.50 for its limited edition Castle Long Reserve.

19. Plaintiffs bring this class and private attorney general action against

Defendant, on behalf of themselves, the proposed classes, and the general public,

in order to: (a) halt the dissemination of Defendant’s deceptive advertising


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message; (b) correct the false and misleading perception Defendant has created in

the minds of consumers through its representations and omissions; and (c) secure

redress for consumers who have purchased one or more of Defendant’s e-liquids.

Plaintiffs, on behalf of themselves and the proposed classes, allege violations of

California Business & Professions Code §§ 17200, et seq. (“UCL”), the

Consumers Legal Remedies Act, California Civil Code §§ 1750, et seq. (“CLRA”),

breach of express warranty, breach of the Indiana Deceptive Consumer Sales Act,

Ind. Code § 24-5-0.5 et seq., and violations of the New York General Business

Law § 349 (“GBL”).

PARTIES

Plaintiffs

20. Plaintiff Greene is an individual who resides in Indianapolis, Indiana

and who is a citizen of Indiana.

21. Plaintiff Thomas is an individual who resides in Kings County and is a

citizen of New York.

22. Plaintiff Hirtzel is an individual who resides in Sacramento, California

and is a citizen of California.

23. Members of the putative classes reside in California, Indiana, New

York, and other states in the United States.

24. During the relevant period, Plaintiffs, while in the states of Indiana,

New York, and California, were exposed to and saw Defendant’s material,

deceptive marketing claims and packaging. Plaintiffs, relying on Defendant’s

misleading marketing and labeling of Defendant’s products, believed that

Defendant’s products did not carry dangers or risks associated with DA and/or AP.

While in the states of Indiana New York, and California, Plaintiffs purchased

Defendant’s e-liquids, at local retailers and online. Had Defendant disclosed that

its e-liquids contain a variety of toxins, impurities, and related potential health


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hazards which was, or should have been known to Defendant, and as found by

various studies discussed in more detail below, Plaintiffs would not have

purchased Defendant’s e-liquids. Thus, as a result of Defendant’s material

deceptive claims and omissions, Plaintiffs suffered injury in fact and lost money.

25. Plaintiff Greene first purchased Defendant’s e-liquids in May 2014. He

purchased three varieties of Five Pawns Kings e-liquids – Castle Long with 24mg

Nicotine Strength, Fifth Rank with 24mg Nicotine Strength, and Gambit at 24mg

Nicotine Strength. He thereafter intermittently purchased additional Five Pawns e-

liquids. In total, Plaintiff Greene purchased approximately seven 30-ml bottles of

Five Pawns e-liquid for which he paid the retail market price for each bottle, which

was, upon information and belief, $27.50 at all relevant times. Plaintiff Greene

ceased purchasing Defendant’s products when the Cloud9 test results were posted

on the Internet.

26. Plaintiff Thomas purchased Defendant’s e-liquids at a store called

Beyond Vape in New York County, New York in or around March 2015 for which

he paid the retail market price for each. Plaintiff Thomas ceased purchasing

Defendant’s products when the Cloud9 test results were posted on the Internet.

27. Plaintiff Hirtzel fist purchased Defendant’s e-liquids at a store called

Planet of the Vapes in Sacramento County, Carmichael, California in November

2013. Plaintiff Hirtzel purchased one bottle of Five Pawns Castle Long Reserve

with 12mg Nicotine Strength for $37.50. He thereafter intermittently purchased

additional Five Pawns e-liquids in various flavors for which he paid the retail

market price of between $27.50 and $37.50 for each 30ml bottle. Plaintiff Hirtzel

ceased purchasing Defendant’s products when the Cloud9 test results were posted

on the Internet.

Defendant

28. Five Pawns is incorporated in California, and has its corporate


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headquarters at 17145 Von Karman Avenue, Suite 105, Irvine, California 92614.

Defendant carries premium, “handcrafted,” artisan-style e-liquid that is mainly sold

in high-end, boutique vape shops. Defendant currently offers two separate e-juice

lines, the Mixology Edition and Signature Series, each consisting of five unique

and complex flavor choices. The company appears to be following the lead of the

beer and liquor industries, branding itself as a sort of microbrewery, or craft

distiller of e-liquid.

29. Launched in November 2012, Defendant’s products are sold in

hundreds of retail locations in the United States. Defendant’s products are also sold

in 43 other countries.

30. Plaintiffs allege, on information and belief, that at all times herein,

Defendant’s agents, employees, representatives, executives, directors, partners,

and/or subsidiaries were acting within the course and scope of such agency,

employment, and representation, on behalf of Defendant.

FACTUAL ALLEGATIONS

I. E-LIQUIDS AND ELECTRONIC CIGARETTES

31. This action concerns e-liquids sold by Defendant.

32. An electronic cigarette, or e-cigarette, is a device that is an alternative

to tobacco smoking. E-cigarettes are designed to deliver a smoking-like “hit” of e-

liquid vapor, usually containing nicotine, which is inhaled by the user. They work

through the use of a battery operated heating mechanism, which typically converts

the e-liquid that may contain DA, AP, glycerin, glycol, natural and artificial flavors

and, in most electronic cigarettes, various proportions of nicotine, into vapor.

When a person inhales (“vapes”) from an e-cigarette, this mimics the taking of a

“drag” on a traditional tobacco cigarette. A heating device is activated, the e-liquid

is converted into vapor, and the consumer inhales the vapor.

33. According to a 2011 study by the Centers for Disease Control and


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Prevention (“CDC”), as of that year, more than one fifth of smokers in the United

States had tried electronic cigarettes, and 6% of all adults had tried them.5

34. According to a subsequent study by the CDC, nearly 1.8 million middle

and high school students tried e-cigarettes in 2011 and 2012, including

approximately 160,000 students who had never used conventional cigarettes.6 The

study also found that the number of U.S. middle and high school student e-smokers

doubled between 2011 and 2012.7

35. According to analysts, sales of e-cigarettes in America in 2012 were

between $300 million and $500 million.8 This was approximately double what

they were in the preceding year, and sales were projected to double again in 2013.9

36. E-cigarettes and e-liquids are commonly marketed as a “safer”

alternative to traditional cigarettes. However, the CDC published a report in 2014

that the number of calls to poison centers involving e-liquids containing nicotine

rose from one per month in September 2010 to 215 per month in February 2014.

CDC Director Tom Frieden, M.D., M.P.H. commented, “This report raises another

5 Press Release, Centers for Disease Control and Prevention, About One in Five U.S. Adult Smokers Have Tried an Electronic Cigarette (Feb. 28, 2013), http://www.cdc.gov/media/releases/2013/p0228_electronic_cigarettes.html (last visited Nov. 9, 2015). 6 Morbidity and Mortality Weekly Report, Centers for Disease Control and Prevention, Notes from the Field: Electronic Cigarette Use Among Middle and High School Students — United States, 2011–2012 (Sept. 6, 2013), http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6235a6.htm (last visited Nov. 10, 2015). 7 Id. 8 E-cigarettes: Vape ‘Em if You Got ‘Em, THE ECONOMIST, (Mar. 23, 2013), www.economist.com/news/business/21573985-challenge-big-tobacco-vape-em-if-you-got-em (last visited Nov. 10, 2015). 9 Id.


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red flag about e-cigarettes – the liquid nicotine used in e-cigarettes can be

hazardous .”10

37. Aware of the growing popularity and the potential dangers in e-

cigarettes, the United States Food and Drug Administration (the “FDA”) proposed

rules in April 2014 that would require e-cigarettes, including liquid nicotine and

devices, to be approved by the agency. The rules would also ban sales to minors

and require e-cigarette and e-liquid companies to disclose its ingredients. The rules

were expected to be in place by the end of the summer of 2015.

38. Defendant sells what is reportedly premium, high-end e-liquids using

“top notch ingredients”.11 Defendant sells its e-liquids at a high premium, because

the Company uses “natural ingredients” that are “sourced locally,” according to its

Chief Executive Officer (“CEO”), Rodney Jerabek.12

39. Defendant’s e-liquids were introduced to the market with a retail price

of $27.50 and have remained that price, except for its limited edition Castle Long

Reserve, which sells for $37.50. As of the filing of this Complaint, individual Five

Pawns Kings can be purchased at stores across the country including various stores

in California, New York and Indiana. Defendant also sells its products on its own

website, www.fivepawns.com.

40. Defendant’s products are more expensive than those of most of its

competitors. For example, Space Jam, a competitor, offers 15ml bottles for

10 Press Release, Centers for Disease Control and Prevention, New CDC Study Finds Dramatic Increase in E-Cigarette-Related Calls to Poison Centers (Apr. 3, 2014), http://www.cdc.gov/media/releases/2014/p0403-e-cigarette-poison.html (last visited Nov. 10, 2015) (emphasis added). 11 Five Pawns President Interview, FIVE PAWNS, (May 31, 2013), http://fivepawns.com/five-pawns-president-interview/ (last visited Nov. 10, 2015). 12 Id.


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$11.99.13 Another competitor, Ossington by MOSHI, offers 30ml bottles for

$22.00.14 Like Five Pawns, both Space Jam and MOSHI market themselves as

high-end e-liquid brands using quality ingredients.

41. On information and belief, most members of the proposed classes have

bought more than one of Defendant’s products.

II. PUBLISHED STUDIES DEMONSTRATE THE DANGERS AND EXPOSURE TO HEALTH RISKS OF E-LIQUIDS

42. Because of the rapid growth in the use of electronic cigarettes by

consumers in recent years, an increasing number of government agencies, research

facilities, and e-cigarette/e-liquid retailers have begun to conduct studies

concerning the potential health impact and risks of these devices. These studies

have found, inter alia, including with respect to Defendant’s e-liquids: (a)

measurable amounts of DA and/or AP in e-liquids that are, or potentially are,

disease-causing, (b) harmful potential side effects of inhaling e-liquids, and (c) that

more study is needed to determine the full range of health dangers of inhaling e-

liquids.

43. Recently, on June 28, 2015, a UK e-cigarette and e-liquid seller called

Cloud9 hired a laboratory to conduct tests of e-liquids supplied by Defendant as

well as other manufacturers for potentially dangerous chemicals. The results

showed Five Pawns, along with 2 other brands, had dangerously high numbers of

DA and AP, with Five Pawns showing the highest levels Cloud9 had ever seen. 13 Space Jam-Starship 1 (15ml), VAPORDNA, http://www.vapordna.com/Space-Jam-Starship-1-p/sj0009.htm (last visited Nov. 10, 2015). 14 Ossington by MOSHI, ELIQUID.COM, http://www.eliquid.com/collections/ moshi/products/moshi-ossington (last visited Nov. 10, 2015).


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44. Defendant sent a cease and desist letter to Cloud9, and Cloud9 removed

the test results from its website “pending legal advice.”15

45. Notably, the results show that nicotine content varies from 1.8mg to

3.7mg on ostensibly 3mg samples, and much of the propylene glycol and vegetable

glycerin ratios do not match with what Defendant lists on the bottles. As a result,

Cloud9 immediately stopped selling these products.16

46. As an attempt to conduct damage control, in early July 2015, Defendant

released previously unreleased test results on its products that were done in

September 2014 by Newport Scientific, Inc., a laboratory Defendant hired. The

tests showed that the products do in fact contain amounts of DA and AP, contrary

to Defendant’s representations to the public:

15 Liquid Test Results, CREME DE VAPE, http://www.cremedevape.com/Blog/Liquid-test-results (last visited Nov. 11, 2015). 16 Five Pawns Bring Out Legal Big Guns – Cloud 9 Removes Testing Results, THE GRUMPY VAPER, http://thegrumpyvaper.com/five-pawns-bring-out-legal-big-guns-cloud-9-removes-testing-results/ (last visited Nov. 10, 2015).


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47. Specifically, a customer contacted Defendant to inquire if Defendant’s

products contain DA or AP, and a Five Pawns representative name Annoushka

Lyvers replied that “[n]one of our handcrafted flavors use diacetyl or acetone.”

Another customer asked the same question and received a response from the CEO,

who responded: “We use absolutely no Dicetyl or additives of any kind in our

liquids.”17

48. In addition, Russell Wishtart (“Wishtart”), consumer activist, vaping

guru, and host of the popular podcast Click, Bang! that is devoted to issues

regarding vaping, broadcasted a telephone conversation on its July 1, 2015 episode

between Wishtart and a Five Pawns representative. Wishtart telephoned Five

Pawns to ask if their e-liquids, specifically, the Absolute Pin and Bowden’s Mate

flavors, contain AP. The Five Pawns employee answered that the liquids in

question contain trace amounts and then clarified that their test results contain ND

(not detectable levels of AP). However, Defendant’s own test results show that

17 Cloud 9 Removes Five Pawns Testing Results Pending Legal Advice, VAPEMESTOOPID, http://vapemestoopid.co/2015/06/cloud-9-removes-five-pawns-testing-results-pending-legal-advice/ (last visited Nov. 10, 2015).


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Absolute Pin contains 290 μg/ml of AP and that Bowden’s Mate contains 627.7

μg/ml.

49. Cloud9 had initially asked Defendant to provide its own test results

when Cloud9 commenced trading with the Company in the beginning of 2015 but

Defendant declined, at a time when Defendant had conducted testing on its

products and knew the levels of AP and DA in its products.

50. The other two e-liquid companies that carry e-liquids containing high

levels of DA and/or AP, Suprem-e and Mystic Vapor, both began work on

reformulating their products. Mystic Vapor’s reformulated version of a particular

flavor, Vanilla Custard, recently tested free of both DA and AP.18

51. The National Institute for Occupational Safety and Health (“NIOSH”)

released a report dated August 12, 2011 stating the acceptable levels of DA and/or

AP for e-liquids as 65 μg for DA and 137 μg per day for AP (1 μg = 1 millionth of

a gram).19 Both Cloud9’s and Five Pawns’s test results show DA and AP levels

that far exceed these limits. In particular, Absolute Pin tested at 40 μg/ml of DA

and an astonishing 2,500 μg/ml of AP. This means, if a person inhales just 2ml of

Absolute Pin e-liquid they will be over the recommended intake for DA and more

than 36 times over the recommended daily limit for AP. Moreover, almost all of

the e-liquids levels disclosed by Defendant in its own test results are higher than

137 μg per day for AP.

52. On June 30, 2015, the ECTA notified 50 vendors via email to withdraw

and cease sales of Five Pawns e-liquids. According to ECTA’s standards, an e-

18 See ¶ 47 n.17, supra. 19 Criteria for a Recommended Standard: Occupational Exposure to Diacetyl and 2,3-Pentanedione, DEPARTMENT OF HEALTH AND HUMAN SERVICES (Aug. 12, 2011) (draft), http://www.cdc.gov/niosh/docket/archive/pdfs/NIOSH-245/0245-081211-draftdocument.pdf (last visited Nov. 10, 2015).


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liquid with AP levels of more than 45 μg/ml but less than 100 μg/ml requires

disclosure to the public, and e-liquids with levels of more than 100 μg/ml cannot

be sold by ECTA members and immediate stop sale is required.20

20 ECTA E-Liquid Testing Standards, ECTA, http://www.ectaofcanada.com/pagedisp.php?section=E-Liquid_Testing (last visited Nov. 10, 2015).


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53. In order to create positive spin on the detrimental publicity these test

results have caused, Defendant released a statement on its website containing false

assertions such as “[H]igh levels of both diacetyl and AP are present in cigarettes,


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yet there has been no link to bronchial obliterates,” and “AP has not been linked to

any health concerns related specifically to vaping . . . its relative safety or harm is

unknown.”21 However, studies have shown that DA and AP do cause lung

damage.22

54. E-cigarettes are a subject of concern to major international entities. The

ECTA took action and ordered a stop sale for five Five Pawns e-liquids and

ordered disclosure of DA and/or AP levels for three Five Pawns e-liquids. A

similar trade association in the United Kingdom has taken similar measures

regarding Defendant’s products.

55. Numerous other studies have been performed by universities and other

research centers, and have reported similar concerns about the potential for health

risks associated with electronic cigarettes. III. DEFENDANT’S ADVERTISING OF ITS FIVE PAWNS E-LIQUIDS

IS MATERIALLY DECEPTIVE, FALSE AND MISLEADING

56. Defendant has carried out a consistent and widespread campaign of

deceptively promoting its e-liquids. Its core marketing statement indicating that its

products contain quality ingredients or similar variations, and its repeated

statements that its products do not contain DA and AP, are false and misleading

given the studies discussed above that have found DA and AP in Defendant’s e-

liquids and that DA and AP are found to be hazardous to one’s health. It is also

false and misleading given the content of Defendant’s products because there is

still insufficient research for Five Pawns to assert or convey that its products do not

pose long term health dangers. Defendant’s statements and omissions have

21 Five Pawns – Be Informed, FIVE PAWNS (June 29, 2015), http://fivepawns.com/five-pawns-test-results/ (last visited Nov. 10, 2015). 22 See Farsalinos, Konstantinos E., et al., Evaluation of Electronic Cigarette Liquids and Aerosol for the Presence of Selected Inhalation Toxins, J. OF NICOTINE

& TOBACCO RESEARCH (Aug. 18, 2014); see also ¶ 52 n.20, supra.


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occurred in at least three forms, all of which constitute “advertising.” These

include: its packaging, inserts to its packaging and shipping materials, and its

website through which it directly sells its e-liquids to the public. Defendant’s

pervasive advertising message conveys the impression and false statement that its

e-liquids do not contain DA and/or AP, and when it felt compelled to release its

test results, that the amounts of DA and/or AP that are in fact in its products do not

carry any risk of disease. As demonstrated above in Section II, however, this is

materially deceptive, false and misleading given the information revealed by

studies that not only do Defendant’s e-liquids contain DA and AP, but they are

potentially dangerous to consumers’ health and they also may carry many risks of

disease, including COPD, emphysema, and Bronchiolitis Obliterans. Information

regarding the effects of inhaling such substances must be disclosed to ensure that a

reasonable consumer is not misled.

57. Defendant’s packaging on its e-liquids only discloses the amount of

nicotine, propylene glycol and vegetable glycerin. It does not state that its products

contain AP and/or DA, nor does it contain a warning regarding the hazardous

effects on the human body of inhaling AP and DA.

58. Defendant’s pattern of deceptive marketing continues today, including

false, misleading and deceptive statements, as discussed in Section II, supra.

59. Defendant’s current packaging and advertising conveys the impression

that the product contains no meaningful health risks other than possibly those that

are a direct result of nicotine:


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60. While Defendant does disclose that its e-liquids contain certain levels

of nicotine (selected by the customer) and that the ratio of propylene glycol and

vegetable glycerin is 50/50, nowhere on the packaging does it mention the

existence of DA and AP. By omitting these ingredients from the label, Defendant

denies consumers at the point of sale the opportunity to decide for themselves

whether they are willing to take the risk of inhaling these chemicals. For example,

by omitting the ingredients, Defendant hides the fact that its e-liquids contain DA

and/or AP, chemicals found to cause various lung diseases and thus no longer used

by certain of its competitors in their e-cigarettes. Moreover, as discussed below,

omitting the ingredients on the package conceals the dangers associated with the

chemicals contained in its e-liquids, which are described in the studies referenced

above.

61. The text of the warning on Defendant’s website reads, in its entirety:

WARNING: This product is not a smoking cessation

product and has not been tested as such. The FDA has

not evaluated the safety of this product or any of the

statements made by the manufacturer. This product is

intended for use by persons of legal age or older, and

not by children, women who are pregnant or breast

feeding, or persons with or at risk of heart disease, high

blood pressure, diabetes, or taking medicine for

depression or asthma. Nicotine is addictive and habit

forming, and can be toxic if in contact with skin, or if

swallowed. Nicotine can increase your heart rate and

blood pressure and cause dizziness, nausea, and

stomach pain. Inhalation of this product may aggravate

existing respiratory conditions. Ingestion of the non-


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vaporized concentrated ingredients can be poisonous.

This product is not intended to diagnose, treat, cure or

prevent any condition, disorder, disease or physical or

mental condition.

CA Proposition 65 WARNING: This product contains

nicotine, a chemical known to the State of California to

cause birth defect or other reproductive harm.

Ingredients: Tobacco-Derived Nicotine, Vegetable

Glycerin, Propylene Glycol, and Natural and Artificial

Flavors.

Use only as intended - Under age sales to minors are

prohibited and subject to criminal and civil penalties.23

62. The text on a bottle of Five Pawns e-liquid is as follows24:

63. By warning of risks relating to nicotine, and the risks that may arise if

23 FIVE PAWNS, http://fivepawns.com (last visited Nov. 10, 2015). 24 Actual bottle of Five Pawns e-liquid purchased by Plaintiff Thomas.


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the concentrated contents of the cartridge are swallowed without being vaporized,

this packaging implies that those are the only health-related risks that relate to

Defendant’s e-liquids. The website warning is more substantial compared to the

warning label on the product packaging, but still inadequate. Warnings regarding

inhalation of the products and that it “may aggravate existing respiratory

conditions” is misleading as studies show that inhaling DA and AP causes

respiratory conditions, rather than merely aggravating them. Further, the website

and the packaging omit reference to the other toxins and impurities, including DA

and AP found in Defendant’s e-liquids, and inaccurate levels of nicotine, as

discussed above in Section II.

64. As demonstrated below, Defendant’s pervasive advertisements

representing that its products are of high quality and the levels of DA and AP

contained therein are materially deceptive, false and misleading given the studies

discussed above in Section II and fail to disclose that such research and studies

have raised significant concerns about the health risks of Defendant’s e-liquids,

including but not limited to:

the harmful impact to lung capacity as a result of the chemicals,

including DA, AP, and propylene glycol, that are present in

Defendant’s e-liquids; and

other potentially dangerous but unknown health effects caused by the

long term use of e-cigarettes and e-liquids, including Defendant’s e-

liquids.

65. On June 29, 2015, in the “News” section of its website, Defendant told

its customers and potential customers:

In response to the diacetyl concern in 2014, some vapor industry

flavor suppliers began using acetyl propionyl (AP), Also known as 2,3

pentanedione, as a substitute for diacetyl. While AP has not been


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linked to any health concerns related specifically to vaping, and it is

not banned by the FDA or any International body, its relative safety or

harm is unknown.25

66. Defendant also stated:

Five Pawns does not feel there is any concern with diacetyl or AP in

our e-liquids at current levels. AP can be an important flavor

enhancer for flavor profiles that are creamy in nature, and is used

widely in the food and beverage industries.26

67. Again, this is false and misleading because, as shown in Section II,

supra, DA and AP are harmful to the user’s health. The fact that AP is approved by

the FDA as an ingredient in food for ingestion is irrelevant as it is proven, as

described in Section II, that ingesting AP is safe but inhaling AP is not.

68. By stating that the FDA has yet to ban DA and AP, and only including

a warning regarding the harmful effects of ingestion on its product packaging,

Defendant creates the false and misleading impression that these substances carry

no risk and are safe as used for inhalation, as discussed above. However, the

gastrointestinal system processes foreign matter differently than the respiratory

system, and ingredients that may be safe when digested may not be safe when

inhaled, especially with long term use. The additional statement that AP “is not

banned by the FDA or any International body” is itself misleading in the absence

of reference to the studies finding that these ingredients may not be safe when

inhaled, including, but not limited to, the studies referenced in Section II above.

For example, the study conducted by Professor Farsalinos stated: “Although the

majority of flavourings are ‘Generally Recognized As Safe’ (GRAS) for food use,

25 See ¶ 53 n.21, supra. 26 Id.


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these substances have not been adequately tested for safety when inhaled.” See ¶

53 n.22 at 3, supra. Farsalinos continued:

[T]here are some chemicals which, although approved for ingestion,

have already established adverse health effects when inhaled. A

characteristic example of this is diacetyl [DA]. This substance, also

known as 2,3-butanedione, is a member of a general class of organic

compounds referred to as diketones . . . [DA] has been associated with

decline in respiratory function, manifested as reduced Forced

Expiratory Volume in . . . subjects exposed to it through inhalation.

Additionally it has been implicated in the development of

bronchiolitis obliterans . . . .

Id. at 4.

69. Also found in the June 29, 2015 blog post in the “News” section on

Defendant’s website, Defendant states, with respect to DA that it “can naturally

occur in vapor liquids, just as with beer and wine, and some fruits such as

strawberries.”27

70. To draw a parallel between DA in e-liquids and beer, wine, and

strawberries is deceptive and misleading, as demonstrated by the studies cited

supra in Section II.

71. Finally, Defendant lists the other ingredients of its e-liquids as

unspecified “Natural and Artificial Flavors.” This is deceptive and misleading

because the website does not disclose what those “Flavors” are or, if they contain

AP and/or DA nor does it acknowledge that safety for use in food products does

not denote safety for use in inhaled products, as described above.

72. On July 9, 2015, Plaintiffs, through their attorneys, sent Defendant a

27 See ¶ 53 n.21, supra.


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pre-suit demand letter describing the allegations in this complaint.

73. On July 21, 2015, Defendant released its latest test results on its current

ten vapor liquid flavors. Results for five of those ten flavors were identical to the

results from the test performed on October 2014. After numerous comments on

social media regarding the virtual impossibility of obtaining the same results down

to the tenth of a μg/ml, on July 24, 2015, Defendant was compelled to insert

asterisks in the “new” test results explaining that, five of those ten flavors, were in

fact, not retested at all. The Company is therefore continuing to deceive its

consumers. In fact, the post dated July 21, 2015 continues to state that “Five Pawns

is pleased to release the latest test results on our current 10 vapor liquid flavors.”28

The disclaimer that Defendant inserted can only be seen if you click on the pdf

document embedded in the blog post.

74. On August 7, 2015, counsel for Defendant sent a letter to counsel for

the Class and Subclasses. In the letter, counsel described the actions purportedly

taken by Defendant to cure the violations in Plaintiffs’ pre-suit demand letter.

Defendant claimed that it had “taken proactive steps to ensure proper

communication, correction, and clarification of any prior inaccurate statements,

including removing all outdated responses from all customer service computers,”

as an effort to correct its “inadvertent mistaken responses” to “specific inquiries by

a handful of individuals.”

75. Counsel for Defendant also stated that moving forward, Defendant will

post results from DA and AP testing “on all of its liquids” on its website on a

quarterly basis. Id.

76. The letter also stated that Defendant had contacted recipients of the

28 Five Pawns 3Q 2015 & Past 12 Months Test Results, FIVE PAWNS (July 21, 2015), http://fivepawns.com/fivepawns-2015-test-results/ (last visited Nov. 10, 2015).


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communications at issue and had offered refunds as compensation.

77. These actions fail to cure the defects as alleged in this Complaint.

Defendant continues to misrepresent to its customers the adverse health effects of

its products. Its website continues to state that Defendant “source[s] solely

diacetyl-free ingredients, only to discover that trace amounts of diacetyl can

naturally occur in vapor liquids . . . .”29 This statement is false as the results from

Defendant’s own testing show, that some of Defendant’s e-liquids contain levels of

diacetyl that exceed amounts that are naturally occurring.

78. Defendant also states that “AP has not been linked to any health

concerns related specifically to vaping . . . and its relative safety or harm is

unknown.”30 This statement is false as studies have demonstrated that AP (as well

as DA) causes significant damage to the lungs. 31

79. Moreover, contrary to the letter, Defendant does not post test results of

“all of its liquids.” Defendant, in a footnote contained in a document embedded on

its website, admitted that some of its e-liquids have not been tested since

September 2014.

80. The fact that Defendant contacted a “handful of individuals” by email

does not cure the violations outlined in this Complaint. Not only does the email

contain more false statements and misrepresentations – i.e., that the diacetyl found

in Defendant’s e-liquids are naturally occurring, and that Defendant will “post test

results quarterly on all of its liquids – but contacting a few individuals is

29 See ¶ 53 n.21, supra. 30 Id. 31 NIOSH Alert: Preventing Lung Disease in Workers Who Use or Make Flavorings, DEP’T OF HEALTH AND HUMAN SERVICES (Dec. 2003), http://www.cdc.gov/niosh/docs/2004-110/pdfs/2004-110.pdf (last visited Nov. 10, 2014).


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insufficient to cure the alleged violations for the proposed Class and Subclasses.

81. On August 21, 2015, Defendant announced on its website that it is

ceasing production on five of its e-liquid flavors – Absolute Pin, Sixty-Four, Fifth

Rank, Lucena, and Perpetual Check, and consolidating the other five flavors,

Castle Long, Grandmaster, Gambit, Queenside, and Bowden’s Mate, into a

collection called The Insignia Series.32 These actions are also insufficient to cure

the alleged violations for the proposed Class and Subclasses.

82. On September 9, 2015, counsel for Plaintiffs responded to the August 7,

2015 letter asserting that the actions Defendant had taken to date do not cure the

defects alleged herein. Enclosed with the letter was a draft copy of this complaint

and an invitation to confer regarding the outstanding violations.

CLASS ACTION AND PRIVATE ATTORNEY GENERAL ALLEGATIONS

83. Plaintiffs bring this action as a class action pursuant to Rule 23(a) and

(b)(2) and/or (b)(3) of the Federal Rules of Civil Procedure (“Rule”) for the

purpose of asserting the claims alleged in this Complaint on a common basis.

Plaintiffs bring this action on behalf of themselves and all members of the

following class comprised of:

All persons, exclusive of Defendant and its employees, who

purchased in the United States, one or more Five Pawns e-liquids sold

by Defendant from November 2012 to the present (the “Class”).

84. Plaintiff Greene brings this action on behalf of himself and all members

of the following subclass comprised of:


purchased in Indiana one or more Five Pawns e-liquids sold by

32 Updated Tasting Notes, FIVE PAWNS (Aug. 21, 2015), http://fivepawns.com/updated-tasting-notes/ (last visited Nov. 10, 2015).


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Defendant from November 2012 to the present (the “Indiana

Subclass”).

85. Plaintiff Thomas brings this action on behalf of himself and all

members of the following subclass comprised of:


purchased in New York State one or more Five Pawns e-liquids sold

by Defendant from November 2012 to the present (the “New York

Subclass”).

86. The Indiana Subclass and the New York Subclass are collectively

referred to herein as the “Subclasses,” and the Class and Subclasses are

collectively referred to herein as the “Classes.”

87. Plaintiffs reserve the right to modify or amend the definitions of the

Classes after they have had an opportunity to conduct discovery.

88. Numerosity. Rule 23(a)(1). The members of the Classes are so

numerous that their individual joinder is impracticable. Plaintiffs are informed and

believe that the proposed Classes contain at least thousands of purchasers of

Defendant’s e-liquids who have been damaged by Defendant’s conduct as alleged

herein. The number of Class members is unknown to Plaintiffs but could be

discerned from the records maintained by Defendant.

89. Existence of Common Questions of Law and Fact. Rule 23(a)(2).

This action involves common questions of law and fact, which include, but are not

limited to, the following:

a. Whether the statements made by Defendant as part of its

advertising for Defendant’s e-liquids discussed herein are true,

or are reasonably likely to deceive, given the omissions of

material fact described above;

b. Whether Defendant’s conduct described herein constitutes a


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deceptive act or practice in violation of the CLRA;

c. Whether Defendant’s conduct described herein constitutes an

unlawful, unfair, and/or fraudulent business practice in

violation of the UCL;

d. Whether Defendant’s conduct described herein constitutes

unfair, deceptive, untrue or misleading advertising in violation

of the UCL;

e. Whether Defendant’s conduct constitutes a breach of express

warranty;

f. Whether Defendant’s conduct described herein constitutes an

unconscionable, deceptive, or unfair act or practice in violation

of the Indiana Deceptive Consumer Sales Act;

g. Whether Defendant’s conduct described herein constitutes a

deceptive act or practice in violation of the GBL;

h. Whether Plaintiffs and the other members of Classes are

entitled to damages; and

i. Whether Plaintiffs and the Classes are entitled to injunctive

relief, restitution or other equitable relief and/or other relief as

may be proper.

90. Typicality. Rule 23(a)(3). All members of the Classes have been

subject to and affected by the same conduct and omissions by Defendant. The

claims alleged herein are based on the same violations by Defendant that harmed

Plaintiffs and members of the Classes. By purchasing Five Pawns e-liquids during

the relevant time period, all members of the Classes were subjected to the same

wrongful conduct. Plaintiffs’ claims are typical of the Classes’ claims and do not

conflict with the interests of any other members of the Classes. Defendant’s

unlawful, unfair, deceptive, and/or fraudulent actions and breaches of warranty


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concern the same business practices described herein irrespective of where they

occurred or were experienced.

91. Adequacy. Rule 23(a)(4). Plaintiffs will fairly and adequately protect

the interests of the members of the Classes. Plaintiffs have retained counsel

experienced in complex consumer class action litigation, and Plaintiffs intend to

prosecute this action vigorously. Plaintiffs have no adverse or antagonistic

interests to those of the Classes.

92. Injunctive and Declaratory Relief. Rule 23(b)(2). Defendant’s actions

regarding the deceptions and omissions regarding Five Pawns e-liquids are

uniform as to members of the Classes. Defendant has acted or refused to act on

grounds that apply generally to the Classes, so that final injunctive relief as

requested herein is appropriate respecting the Classes as a whole.

93. Predominance and Superiority of Class Action. Rule 23(b)(3).

Questions of law or fact common to the Classes predominate over any questions

affecting only individual members, and a class action is superior to other methods

for the fast and efficient adjudication of this controversy, for at least the following

reasons:

a. Absent a class action, members of the Classes as a practical

matter will be unable to obtain redress, Defendant’s violations

of their legal obligations will continue without remedy,

additional consumers will be harmed, and Defendant will

continue to retain its ill-gotten gains;

b. It would be a substantial hardship for most individual members

of the Classes if they were forced to prosecute individual

actions;

c. When the liability of Defendant has been adjudicated, the Court

will be able to determine the claims of all members of the


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Class;

d. A class action will permit an orderly and expeditious

administration of the claims of each member of the Classes and

foster economies of time, effort, and expense;

e. A class action regarding the issues in this case does not create

any problems of manageability; and

f. Defendant has acted on grounds generally applicable to the

members of the Classes, making class-wide monetary relief

appropriate.

94. Plaintiffs do not contemplate class notice if the Classes are certified

under Rule 23(b)(2), which does not require notice, and notice to the putative

Classes may be accomplished through publication, signs or placards at the point-

of-sale, or other forms of distribution, if necessary; if the Classes are certified

under Rule 23(b)(3); or if the Court otherwise determines class notice is required.

Plaintiffs will, if notice is so required, confer with Defendant and seek to present

the Court with a stipulation and proposed order on the details of a class notice

program.

COUNT I

Violations of the Consumers Legal Remedies Act

(Cal. Civil Code §§ 1750, et seq.)

(On Behalf of Plaintiffs and the Class)

95. Plaintiffs repeat and reallege the allegations contained in the paragraphs

above, as if fully set forth herein.

96. This cause of action is brought pursuant to the Consumers Legal

Remedies Act, California Civil Code §§ 1750, et seq. (the “CLRA”), which

provides that enumerated listed “unfair methods of competition and unfair or

deceptive acts or practices [including those listed below in ¶ 101] undertaken by


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any person in a transaction intended to result or which results in the sale or lease of

goods or services to any consumer are unlawful,” Cal. Civ. Code § 1770, and that

“[a]ny consumer who suffers any damage as a result of the use or employment by

any person of a method, act, or practice declared to be unlawful by Section 1770

may bring an action against that person to recover or obtain,” various forms of

relief, including an injunction and damages. Cal. Civ. Code § 1780. This cause of

action is seeks both injunctive relief and damages on behalf of the Class.

97. On July 9, 2015, prior to the filing of this Complaint, Plaintiffs sent

Defendant a CLRA notice letter providing the notice required by California Civil

Code section 1782(a). Plaintiffs sent the letter via certified mail, return receipt

requested, to Defendant’s principal place of business in Irvine, California advising

Defendant that it is in violation of the CLRA and must correct, replace or

otherwise rectify the goods and/or services alleged to be in violation of section

1770. Defendant was further advised that in the event the relief requested was not

provided within thirty (30) days, Plaintiffs would file their Complaint that would

include a request for monetary damages pursuant to the CLRA. A true and correct

copy of Plaintiffs’ letter is attached hereto as Exhibit A.

98. On August 7, 2015, Defendant, by its attorneys, responded to Plaintiffs’

letter. A true and correct copy of Defendant’s letter is attached hereto as

Exhibit B. As set forth in Defendant’s letter, Defendant did not correct, replace, or

otherwise rectify the goods and/or services alleged in Plaintiffs’ letter.

Accordingly, Plaintiffs seek monetary damages pursuant to the CLRA.

99. Plaintiffs were deceived by Defendant’s unlawful practices as described

more fully above, which included carrying out an advertising campaign, directed at

Plaintiffs and the Class, conveying the message that Defendant’s e-liquids are free

of DA and AP and variations of that statement. This advertising campaign was

deceptive, false and misleading given: the ingredients and characteristics of


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Defendant’s products which were known or should have been known to Defendant;

and the test results and studies that have found DA and AP and other harmful

impurities in Defendant’s e-liquids, and that inhaling these substances could be

harmful to health, none of which was disclosed. Also undisclosed was the lack of

research required to assess the potential danger of electronic cigarettes, especially

in long term users.

100. Defendant’s actions, representations and conduct have violated, and

continue to violate, the CLRA because they extend to transactions that are intended

to result, or which have resulted, in the sale of goods to consumers.

101. Defendant marketed, sold and distributed its e-liquids in California

and throughout the United States during the relevant period.

102. Plaintiffs and members of the Class are “consumers” as that term is

defined by the CLRA in California Civil Code section 1761(d).

103. Defendant’s e-liquids were and are “good[s]” within the meaning of

California Civil Code section 1761(a) & (b).

104. Defendant violated the CLRA by engaging in at least the following

practices proscribed by California Civil Code section 1770(a) in transactions with

Plaintiffs and the Class which were intended to result in, and did result in, the sale

of Defendant’s e-liquids:

(5) Representing that [Five Pawns e-liquids] have . . . approval,

characteristics . . . uses [or] benefits . . . which they do not have . . . .

***

(7) Representing that [Five Pawns e-liquids] are of a particular standard,

quality or grade . . . if they are of another.

***

(9) Advertising goods . . . with intent not to sell them as advertised.

105. As such, Defendant’s conduct constitutes unfair methods of


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competition and unfair or fraudulent acts or practices because it does not sell, and

because it intends not to sell, the e-liquids as advertised and instead misrepresents

the particulars by, in its marketing, representing its e-liquids as described above

when it knew, or should have known, that the representations and advertisements

were deceptive, false and misleading in light of the omissions of material facts as

described above.

106. The omitted information would have been material to a reasonable

customer in his or her decision as to whether to purchase Defendant’s e-liquids

and/or purchase Defendant’s e-liquids at the price at which they were offered.

107. Defendant had a duty to disclose this information to Plaintiffs and the

members of the Class for several reasons. First, Defendant repeatedly made the

representation that its products are free of DA and AP and that even if they do,

they do contain those ingredients, they do not pose a health risk, or closely

analogous representations, as detailed above. Disclosure of the omitted

information, including information in the studies referred to supra in Section II,

was necessary to avoid the false impression of safety provided by that tagline.

Second, Defendant was in a position to know of the omitted information, both from

its own product knowledge and creation decisions and the studies of the presence

of DA and AP in its e-liquids, especially as described in the studies and test results,

including Defendant’s own test results referenced supra in Section II, while

consumers were not reasonably in a position to be aware of Defendant’s internal

product information or such studies. Third, Defendant actively failed to disclose

these material facts to, or actively concealed these material facts from, Plaintiffs

and the Class. Finally, while Defendant made representations about the risks

associated with its e-liquids, stating that its products contain nicotine and that

consumers bear risks related thereto, those representations were misleading half-

truths because they implied that those are all of the risks relating to the product,


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when, in fact, they are not.

108. Defendant provided Plaintiffs and the other Class members with e-

liquids that did not match the quality portrayed by its marketing.

109. As a result, Plaintiffs and members of the Class have suffered

irreparable harm. Plaintiffs’ and the other Class members’ injuries were

proximately caused by Defendant’s conduct as alleged herein. Plaintiffs,

individually and on behalf of all other Class members, seek entry of an order

enjoining Defendant from continuing to employ the unlawful methods, acts and

practices alleged herein pursuant to California Civil Code section 1780(a)(2),

awarding exemplary and punitive damages against Defendant pursuant to

California Civil Code sections 1780(a)(1) and (a)(4), and ordering the payment of

costs and attorneys’ fees, and such other relief as deemed appropriate and proper

by the Court under California Civil Code section 1780(a)(2). If Defendant is not

restrained from engaging in these practices in the future, Plaintiffs and the Class

will continue to suffer harm.

110. Pursuant to section 1780(d) of the CLRA, attached hereto as Exhibit C

is an affidavit showing that this action has been commenced in the proper forum.

COUNT II

Violations of the Unfair Competition Law

(Cal. Bus. & Prof. Code §§ 17200, et seq.)


111. Plaintiffs repeat and reallege the allegations contained in the

paragraphs above, as if fully set forth herein.

112. The Unfair Competition Law, Cal. Business & Professions Code §§

17200, et seq. (“UCL”), prohibits any “unlawful,” “unfair,” or fraudulent, business

act or practice and any false or misleading advertising.

113. In the course of conducting business, Defendant committed unlawful


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business practices by, inter alia, making the representations (which also constitute

advertising within the meaning of § 17200) and omissions of material facts, as set

forth more fully herein, and violating California Civil Code sections 1750, et seq.,

and the common law.

114. Plaintiffs, individually and on behalf of other Class members, reserve

the right to allege other violations of law which constitute other unlawful business

acts or practices. Such conduct is ongoing and continues to this date.

115. Defendant’s actions constitute “unfair” business acts or practices

because, as alleged above, inter alia, Defendant engages in deceptive and false

advertising, and misrepresents and omits material facts regarding its e-liquids, and

thereby offends an established public policy, and engages in immoral, unethical,

oppressive, and unscrupulous activities that are substantially injurious to

consumers. This conduct constitutes violations of the unfair prong of Business &

Professions Code sections 17200, et seq.

116. Business & Professions Code sections 17200, et seq., also prohibits

any “fraudulent business act or practice.”

117. Defendant’s actions, claims, nondisclosures, and misleading

statements, as alleged in this Complaint, also constitute “fraudulent” business

practices in violation of the UCL because, among other things, they are false,

misleading, and/or likely to deceive reasonable consumers within the meaning of

Business & Professions Code sections 17200, et seq.

118. There were reasonably available alternatives to further Defendant’s

legitimate business interests, other than the conduct described herein.

119. As a result of Defendants’ pervasive false marketing, including

deceptive and misleading acts and omissions as detailed in this Complaint,

Plaintiffs and other members of the Class have in fact been harmed as described

above. If Defendant had disclosed the information discussed above about its e-


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liquids and otherwise been truthful about their safety, Plaintiffs would not have

purchased Defendant’s products. Defendant was also able to charge more than

what its e-liquids would have been worth had it disclosed the truth about them.

120. As a result of Defendant’s unlawful, unfair, and fraudulent practices,

Plaintiffs and the other Class members have suffered injury in fact and lost money.

121. As a result of its deception, Defendant has been able to reap unjust

revenue and profit in violation of the UCL.

122. Unless restrained and enjoined, Defendant will continue to engage in

the above-described conduct. Accordingly, injunctive relief is appropriate for

Plaintiffs and the Class.

123. As a result of Defendant’s conduct in violation of the UCL, Plaintiffs

and members of the Class have been injured as alleged herein in amounts to be

proven at trial because they purchased Defendant’s e-liquids without full

disclosure of the material facts discussed above.

124. As a result, Plaintiffs individually, and on behalf of the Class, and the

general public, seek restitution and disgorgement of all money obtained from

Plaintiffs and the other members of the Class collected by Defendant as a result of

its unlawful, unfair, and/or fraudulent conduct, and seek injunctive relief, and all

other relief this Court deems appropriate, consistent with Business and Professions

Code section 17203.

125. Plaintiffs are also suing on behalf of the general public as defined in

Business and Professions Code section 17204 in order to enjoin and remedy the

ongoing unlawful, unfair, and fraudulent business practices alleged herein and to

obtain declaratory, injunctive, and other appropriate relief on behalf of all those

members of the general public who have been victimized by Five Pawns’s actions.


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COUNT III

Violations of the False Advertising Law

(Cal. Bus. & Prof. Code §§ 17500 et seq.)




127. Plaintiffs have standing to pursue this claim as Plaintiffs suffered

injury in fact as a result of Defendant’s actions as set forth herein. Specifically,

prior to the filing of this action, Plaintiffs purchased Defendant’s e-liquids in

reliance upon Defendant’s marketing claims. Plaintiffs used Defendant’s e-liquids

believing that the products were of a higher quality and safer to consume than as

advertised.

128. Defendant’s business practices as alleged herein constitute unfair,

deceptive, untrue, and misleading advertising pursuant to California Business and

Professions Code sections 17500, et seq., because Defendant has advertised its

Products in a manner that is untrue and misleading, or that Defendant knew was

untrue or misleading, or omitted material information from its advertising which

Defendant had a duty to disclose.

129. Defendant’s wrongful business practices have caused injury to

Plaintiffs and the Class, in the form of the lost purchase price of the e-juices.

Plaintiffs and the Class purchased the products after being exposed to Defendant’s

false or deceptive advertising claims, as described herein.

130. Defendant’s conduct caused and continues to cause substantial injury

to Plaintiffs and the other members of the Class. Plaintiffs and the Class continue

to be exposed to Defendant’s false and/or misleading advertising every time they

shop for e-liquids and encounter Defendant’s false or deceptive advertising on

store shelves or on the internet. Defendant’s competitors will also continue to


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suffer from Defendant’s unfair or deceptive business conduct if injunctive relief is

not afforded.

131. Pursuant to section 17535 of the California Business and Professions

Code, Plaintiff and the Class seek an order of this Court enjoining Defendant from

continuing to engage in deceptive business practices, false advertising, and any

other act prohibited by law, including those set forth in this Complaint.

132. Plaintiff and the Class also seek an order for the disgorgement and

restitution of all monies from the sale of Defendant’s e-liquids, which were

unjustly acquired through acts of unlawful, unfair, and/or fraudulent competition.

COUNT IV

Breach of the Indiana Deceptive Consumer Sales Act

(Ind. Code §§ 24-5-0.5, et seq.)

(On Behalf of Plaintiff Greene and the Indiana Subclass)

133. Plaintiff Greene repeats and realleges the allegations contained in the


134. This cause of action is brought pursuant to the Indiana Deceptive

Consumer Sales Act, Ind. Code §§ 24-5-0.5, et seq. (the “IDCSA” or the “Act”).

The stated purpose of the Act is to “protect consumers from supplies who commit

deceptive and unconscionable sales acts” and to “encourage the development of

fair consumer sales practices.” Ind. Code § 24-5-0.5-1(b).

135. This cause of action is for damages pursuant to Indiana Code section

24-5-0.5-4(a). Pursuant to the Act, a consumer may bring an action “for the

damages actually suffered . . . as a result of the deceptive act or [$500], whichever

is greater.” Ind. Code § 24-5-0.5-4(a).

136. Plaintiff Greene and each member of the Indiana Subclass are

consumers and purchased Defendant’s e-liquids during the period of Defendant’s

pervasive false advertising.


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137. Defendant is engaged in trade or commerce within the meaning of the

Act.

138. Indiana Code section 24-5-0.5-2(a)(8) defines “incurable deceptive

act” as “a deceptive act done by a supplier as part of a scheme, artifice, or device

with intent to defraud or mislead.” The wrongs complained of herein are “incurable

deceptive acts” as Plaintiffs gave Defendant sufficient notice and an opportunity to

cure, as alleged more fully infra.

139. Defendant has violated the Act by engaging in the unfair and

deceptive practices as described herein, which included carrying out an advertising

campaign, directed at Plaintiff Greene and the Indiana Subclass, conveying the

message that Defendant’s e-liquids are free of DA and/or AP and that they are not

harmful even if those ingredients do exist in their products, and variations of that

statement, which were deceptive, false and misleading given the studies that have

found carcinogens, toxins, and other potentially harmful impurities in Defendant’s

e-liquids and in e-liquids generally. Also undisclosed was the lack of additional

research which such studies have determined is required to assess the potential

danger of e-liquids, especially in long term users, which failure to disclose offends

public policies and is immoral, unethical, unscrupulous and substantially injurious

to consumers.

140. Plaintiff Greene and the members of the Indiana Subclass have been

aggrieved by Defendant’s unfair and deceptive practices in that they purchased

Defendant’s e-liquids. As a result of Defendant’s unfair and deceptive acts, and

unlawful conduct, Plaintiff Greene and the other members of the Indiana Subclass

have in fact been harmed. If Defendant had disclosed the information discussed

above about Defendant’s e-liquids and had been otherwise truthful about their

safety, Plaintiff Greene would not have purchased Defendant’s products. In fact,

Defendant was able to charge more than what its e-liquids would have been worth


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had it disclosed the truth about them.

141. The damages suffered by Plaintiff Greene and the Indiana Subclass

were directly and proximately caused by Defendant’s unfair and deceptive

practices, as more fully described herein.

142. On July 9, 2015, prior to the filing of this Complaint, Plaintiffs sent

Defendant a notice letter pursuant to Indiana Code section 24-5-0.5-4(a) providing

the required notice. Plaintiffs sent the letter via certified mail, return receipt

requested, to Defendant’s principal place of business in Irvine, California advising

Defendant that it is in violation of the Act and must correct, replace or otherwise

rectify the goods and/or services alleged to be in violation of the Act. Defendant

was further advised that in the event the relief requested has not been provided

within thirty (30) days, Plaintiffs would file their Complaint that would include a

request for monetary damages pursuant to the Act. A true and correct copy of

Plaintiffs’ letter is attached hereto as Exhibit A.

143. On August 7, 2015, Defendant, by its attorneys, responded to

Plaintiffs’ letter. A true and correct copy of Defendant’s letter is attached hereto as

Exhibit B. As set forth in Defendant’s letter, Defendant did not correct, replace, or

otherwise rectify the goods and/or services alleged to be in violation of the Act in

Plaintiffs’ letter. Accordingly, Plaintiff Greene seeks monetary damages pursuant

to the Act.

144. Pursuant to Indiana Code section 24-5-0.5-4(c) Plaintiff Greene, on

behalf of himself and the Indiana Subclass, seeks a declaratory judgment and a

court order enjoining the above-described wrongful acts and practices of

Defendant and for restitution and disgorgement.

145. Additionally, pursuant to Indiana Code section 24-5-0.5-4, Plaintiff

Greene, on behalf of himself and the Indiana Subclass, seeks damages, attorneys’

fees and costs.


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COUNT V

Violations of the New York General Business Law

(N.Y. GBS Law § 349)

(On Behalf of Plaintiff Thomas and the New York Subclass)

146. Plaintiff Thomas repeats and realleges the allegations contained in the


147. This cause of action is brought pursuant to the New York General

Business Law section 349 (“GBL § 349”), which prohibits deceptive acts or

practices in the conduct of any business, trade or commerce or in the furnishing of

any service in New York State.

148. The conduct of Defendant alleged herein violates GBL § 349 in that

Defendant engaged in the unfair and deceptive practices as described herein, which

included carrying out an advertising campaign, directed at Plaintiff Thomas and

the New York Subclass, conveying the message that Defendant’s e-liquids are free

of DA and/or AP and that they are not harmful even if those ingredients do exist in

their products, and variations of that statement, which were deceptive, false and

misleading given the studies that have found carcinogens, toxins, and other

potentially harmful impurities in Defendant’s e-liquids and in e-liquids generally.

Also undisclosed was the lack of additional research which such studies have

determined is required to assess the potential danger of e-liquids, especially in long

term users, which omissions offend public policies and are immoral, unethical,

unscrupulous and substantially injurious to consumers. Such conduct is inherently

and materially deceptive and misleading, and Defendant knew, or by the exercise

of reasonable care should have known, that its misstatements and omissions were

untrue, deceptive or misleading.

149. The materially misleading conduct of Defendant alleged herein was

directed at the public at large.


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150. Defendant’s acts and practices described above are likely to mislead a

reasonable consumer acting reasonably under the circumstances.

151. Defendant has willfully and knowingly violated GBL § 349 because,

in order to increase its own profits, Defendant intentionally engaged in deceptive

and false advertising, misrepresentations and omission of material facts regarding

its e-liquids as discussed above.

152. As a result of Defendant’s deceptive and misleading acts, Plaintiff

Thomas and the other members of the New York Subclass have been injured

because they purchased Defendant’s e-liquids without full disclosure of the

material facts discussed above.

153. As a result of Defendant’s conduct in violation of GBL § 349,

Plaintiff Thomas and the other members of the New York Subclass have been

injured as alleged herein in amounts to be proven at trial because if Defendant had

disclosed the information discussed above about its e-liquids and otherwise been

truthful about their safety, Plaintiff Thomas would not have purchased Defendant’s

products. Defendant was also able to charge more than what its e-liquids would

have been worth had it disclosed the truth about them.

154. As a result, pursuant to GBL § 349, Plaintiff Thomas and the New

York Subclass are entitled to make claims against Defendant for actual or statutory

damages to be determined at trial, but for not less than fifty (50) dollars per New

York Subclass member, such damages to be trebled.

155. Additionally, pursuant to GBL § 349, Plaintiff Thomas and the New

York Subclass make claims for attorneys’ fees, costs, and injunctive relief

requiring Defendant to adequately disclose the omitted information described

above.


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COUNT VI

Breach of Express Warranty




157. Plaintiffs bring this claim individually and on behalf of the Class.

158. Plaintiffs, and each member of the Class, formed a contract with

Defendant at the time Plaintiffs and the other members of the Class purchased

Defendant’s e-liquids or related paraphernalia. The terms of that contract include

the promises and affirmations of fact made by Defendant on its e-liquids packaging

and inserts and through the Five Pawns marketing campaign, as described above.

This product packaging and advertising constitutes express warranties, became part

of the basis of the bargain, and is part of a standardized contract between Plaintiffs

and the members of the Class on the one hand, and Defendant on the other.

159. Plaintiffs and the Class members performed their obligations under the

contract.

160. Defendant breached the terms of this contract, including the express

warranties, with Plaintiffs and the Class by not providing Defendant’s e-liquids that

offered a product free of DA and AP (or similar variations) and otherwise omitted

material information about potential health risks associated with the product. Such

express warranties breached by Defendant include the representations set forth

above in Sections II and III.

161. As a result of Defendant’s breach of its contract, Plaintiffs and the

Classes have been damaged in the amount of the purchase price of the Five Pawns

e-liquids they purchased.


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PRAYER FOR RELIEF

Wherefore, Plaintiffs, on behalf of themselves, all others similarly situated,

and the general public, pray for a judgment:

a. Certifying each of the Classes as requested herein, appointing

Plaintiffs Greene, Thomas and Hirtzel as class representatives for the

Class and respective Subclasses;

b. Requiring Defendant to disgorge or return all monies, revenues and

profits obtained by means of any wrongful act or practice to Plaintiffs

and the members of the Classes under each cause of action where such

relief is permitted;

c. Enjoining Defendant from continuing the unlawful practices as set

forth herein, including marketing or selling its e-liquids without

disclosing the potential health risks relating thereto, and directing

Defendant to engage in corrective action, or providing other injunctive

or equitable relief;

d. Awarding damages pursuant to California Civil Code section 1780,

the Indiana Deceptive Consumer Sales Act, and GBL § 349 including

exemplary and punitive damages to prevent and deter Defendant from

future unlawful conduct;

e. Awarding damages for breach of express warranty;

f. Awarding all equitable remedies available pursuant to California Civil

Code section 1780, Indiana Code section 24-5-0.5-4(c), GBL § 349

and other applicable law;

g. Awarding attorneys’ fees and costs;

h. Awarding pre-judgment and post-judgment interest at the legal rate;

and

i. Providing such further relief as may be just and proper.


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DEMAND FOR JURY TRIAL

Plaintiffs hereby demand a trial by jury on all issues so triable. DATED: November 11, 2015 WOLF HALDENSTEIN ADLER

FREEMAN & HERZ LLP

By: /s/ Rachele R. Rickert RACHELE R. RICKERT

BETSY C. MANIFOLD [email protected] RACHELE R. RICKERT [email protected] BRITTANY N. DEJONG [email protected] 750 B Street, Suite 2770 San Diego, CA 92101 Telephone: 619/239-4599 Facsimile: 619/234-4599 WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP JANINE L. POLLACK [email protected] MICHAEL JAFFE [email protected] GLORIA KUI MELWANI [email protected] 270 Madison Avenue New York, New York 10016 Telephone: 212/545-4600 Facsimile: 212/545-4653 ANDERSEN & SLEATER LLC JESSICA J. SLEATER [email protected] 1345 Avenue of the Americas Suite 2100 New York, New York 10105 Telephone: 212/878-3697

Counsel for Plaintiffs Duane Robert Greene Shawn Randall Thomas, and James Hirtzel

FIVEPAWNS:22386


EXHIBIT A

EXHIBIT A Page 46

Case 8:15-cv-01859 Document 1-1 Filed 11/11/15 Page 1 of 5 Page ID #:47

WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP FOUNDED 1888

270 MADISON AVENUE SYMPHONY TOWERS

750 B STREET – SUITE 2770

SAN DIEGO, CA 92101 NEW YORK, NY 10016

212-545-4600 625 NORTH FLAGER DRIVE

WEST PALM BEACH, FL 33401 JANINE L. POLLACK

DIRECT DIAL: 212-545-4710

FACSIMILE: 212-545-4653

[email protected]

WOLF HALDENSTEIN ADLER

FREEMAN & HERZ LLC

55 WEST MONROE STREET, SUITE 1111

CHICAGO, IL 60603 July 9, 2015

VIA CERTIFIEVIA CERTIFIEVIA CERTIFIEVIA CERTIFIE

VIA CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Five Pawns Inc.

17145 Von Karman Avenue, Suite 105

Irvine, California 92614

Re: Duane R. Greene, Shawn R. Thomas, James Hirtzel – Five

Pawns Inc.

Dear Sir/Madam:

We represent Duane R. Greene, Shawn R. Thomas, and James Hirtzel (“Clients”),

purchasers of vapor liquids, products that we understand are manufactured, marketed and/or sold

by Five Pawns Inc. (“Five Pawns” or the “Company”). Our client James Hirtzel is a citizen of

California. Our client Duane R. Greene is a citizen of Indiana. Our Clients believe that the

Company is engaging in unfair methods of competition and deceptive and misleading consumer

practices in connection with the marketing and sale of Five Pawns’ products.

Specifically, the Company has affirmatively represented that its line of e-cigarette vapor

liquids are free of diacetyl and acetyl propionyl (“DA/AP”) and has thereby been able to charge a

EXHIBIT A Page 47


Five Pawns Inc.

Page 2

July 9, 2015

premium for its products over what could be charged for the products that contain such toxic

chemicals. However, our investigation, including the Company’s own test results of its products,

has revealed that Five Pawns vapor liquids do in fact contain DA/AP. We believe that the

Company has been aware of this during all or part of the time it has sold the products and has

nonetheless persisted with its false representations. Indeed, the Company tested its products in

December 2014 and did not reveal its test results until recently, when an independent electronic

cigarette store, Cloud9Vaping, conducted and disclosed test results on DA/AP levels of the

Company’s products.

Five Pawns has repeatedly denied that its products contain DA/AP, and has failed to

disclose this fact on the packaging on its products and its advertising and marketing.

Accordingly, we submit that the Company has violated and continues to violate Cal. Civil Code

§§ 1750, et seq. (the “CLRA”), which provides that “unfair methods of competition and unfair or

deceptive acts or practices undertaken by any person in a transaction intended to result or which

results in the sale or lease of goods or services to any consumer are unlawful” (CLRA § 1770),

and Cal. Business and Professions Code §§ 17200, et. seq. (the “UCL”), which prohibits any

“unlawful,” “unfair” or “fraudulent” business act or practice and any false or misleading

advertising. The Company also violated New York General Business Law § 349, which prohibits

deceptive acts or practices in the conduct of any business, trade, or commerce or in the

furnishing of any service in New York State, and the Indiana Deceptive Consumer Sales Act,

Ind. Code §§ 24-5-0.5-1 et. seq., which broadly prohibits unfair or unconscionable and deceptive

acts. The Company violated and continues to violate these statutes by omitting information

regarding the DA/AP levels in its products with knowledge that the products contain DA/AP at

dangerous levels. Moreover, testing by Cloud9Vaping showed higher levels of nicotine than

levels disclosed on the Company’s packaging.

In addition, we believe that the misrepresentations made by the Company constitute a

breach of an express warranty from the Company to our Clients and other consumers that all

Five Pawns’ vapor liquids are free of DA/AP.

This letter is being served on behalf of our Clients and all similarly situated consumers,

pursuant to CLRA § 1782(a) and Ind. Code §§ 24-5-0.5-5 and 24-5-0.5-2(a)(5)-(8), who hereby

demand that the Company (1) engage in corrective advertising concerning the unfair and/or

deceptive acts or practices alleged herein; (2) cease and desist from the unlawful conduct

described herein; and (3) reimburse our Clients and all other similarly situated consumers for the

amount that they paid for these products that were sold using unfair and/or deceptive acts or

practices.

We have sent this letter directly to you in order to fully comply with the requirements of

CLRA § 1782(a) and I.C. 24-5-0.5-5(a). Under the provisions of those statutes, we are providing

you with the opportunity to make a written offer of settlement of this claim within 30 days. If

you fail to make a good faith offer of settlement in response to this request and our Clients

EXHIBIT A Page 48


Five Pawns Inc.

Page 3

July 9, 2015

thereafter institute legal action and a court finds in their favor, the court may award them and

similarly situated consumers damages, attorneys’ fees and costs. We, of course, hope that you

will act immediately to rectify this situation and stand ready to discuss a reasonable resolution of

this matter on terms acceptable to our Clients and similarly situated consumers.

If you have any questions, require any additional information or would like to discuss

these matters, please do not hesitate to contact me.

Very truly yours,

/s Janine L. Pollack

Janine L. Pollack

JP/781580

EXHIBIT A Page 49


Date: July 27, 2015 Gloria Melwani: The following is in response to your July 27, 2015 request for delivery information onyour Certified Mail™/RRE item number 9414814901279833007035. The delivery recordshows that this item was delivered on July 13, 2015 at 8:43 am in IRVINE, CA 92614.The scanned image of the recipient information is provided below. Signature of Recipient :

Address of Recipient :

Thank you for selecting the Postal Service for your mailing needs. If you require additional assistance, please contact your local Post Office or postalrepresentative. Sincerely, United States Postal Service

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EXHIBIT B

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(f][9 GARCIA RAINEY , ,~, ,~ BLANK~ BoWER.BANKLLP

August 7, 2015

VIA EMAIL, FACSIMILE, AND CERTIFIED MAIL pollackct whatl1.com (212) 545-4653

Janine L. Pollack, Esq. WolfHaldenstein Adler Freeman & Herz, LLP 270 Madison A venue New York, NY 10016

695 To\vn Center Dr., Suite 700 Costa Mesa, CA 92626 Main: (714) 382-7000

Fax: (714) 784-0031

John E. Bowerbank Direct: (714) 382-7005 Office: (7 l 4)3 82-7000

jQowerbank(a garc iaraincy.com

Re: Response by Five Pawns, Inc. - Matter Involving Duane R. Green, Shawn R. Thomas, James Hirtzell

Dear Ms. Pollack,

Please be advised that the law firm of Garcia Rainey Blank & Bowerbank, LLP serves as counsel for Five Pawns, Inc. ("Five Pawns") in connection with this matter. Please direct all future communications to me. This letter serves as a response to your letter dated July 9, 2015 to Five Pawns pertaining to the California Consumer Legal Remedies Act, Indiana Deceptive Sales Act and other applicable laws.

Five Pawns has reviewed the allegations raised in your letter. It takes such allegations very seriously and has investigated such allegations. Preliminarily, Five Pawns has never engaged in any widespread advertising that misrepresented Five Pawns, the ingredients of Five Pawns' products, and/or specific compounds in its vapor liquid.

Five Pawns did, however, discover, a very isolated issue that affected only a small number of individuals on a case by case basis. More specifically, Five Pawns has determined that a small amount of persons submitted individuaJly based questions to Five Pawns' customer service department that related to the presence of 2,3 butanedione (diacteyl) and/or 2, 3 pentanedione (acetyl propionyl). It has further been discovered that Five Pawns' customer service depaitment may have inadvertently and mistakenly responded to certain of those questions by utilizing portions of older responses, which had been sent to customers in response

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to questions received before Five Pawns began testing. Any such inadvertent mistaken responses were not part of a uniform advertising campaign as to the public at large. Rather, any such inadvertent and mistaken responses were sent in response to a small amount of persons on a case by case basis in response to specific inquiries by a handful of individuals.

Without admitting liability, Five Pawns has taken proactive steps to ensure proper communication, correction, and clarification of any prior inaccurate statements, including removing all outdated responses from all customer service computers. Further, moving forward, Five Pawns will be posting test results quarterly on all of its liquids. Anyone can see Five Pawns' latest report at: https:/!Jivepawns.com/fivepa""ns-2015-tcst-rcsults/. Such information should further clarify and correct any prior inaccurate or incomplete responses by Five Pawns' customer service department. Anyone can also read more information within Five Pawns' "Be Informed" post at https: t fhepa\\ns.com lhe-pawns-kst-results .

Five Pawns has also directly contacted recipients, known to Five Pawns at this time, of the communications at issue, and offered refunds and merchandise as compensation. Five Pawns is continuing to investigate this matter and continues to take corrective measures that will be completed in a prompt and reasonable fashion.

To establish liability under Indiana's Deceptive Sales Act, "there must either be compliance with the notice requirements coupled with proof that the act is ' uncured' or proof that the act is ' incurable.'" (A.B.C. Home & Real Estate Inspection, Inc. v. Plummer (1986) Ind.App. 500 N.E. 2d, 1257.) Similarly, California's Consumer Legal Remedies Act provides that the claim notice requirement is to allow a defendant to avoid liability for damages if the defendant corrects the alleged wrongs within 30 days after notice, or indicates within that 30-day period that it will correct those wrongs within a reasonable time. (Morgan v. AT & T Wireless Services, Inc. (App. 2 Dist. 2009) 177 Cal.App.4th 1235.)

Here, Five Pawns immediately corrected any issues by posting test results and other informative information on its website. Moreover, Five Pawns searched its system to locate anyone who submitted a question regarding the compounds and ingredients in Five Pawns. Five Pawns has contacted all known individuals at this time and offered full refunds along with additional consideration as part of a corrective resolution of this matter.

If you have any questions or concerns, please let me know as Five Pawns desires to resolve this matter amicably. Thank you for your cooperation and professionalism.

John E. Bowerbank

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EXHIBIT C

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